Indonesia finance minister says growth above 5.6% is 'critical'

[RIYADH] Indonesia's Finance Minister Sri Mulyani Indrawati said boosting economic growth above 5.6 per cent in 2018 is "very critical" and she hopes the government won't need to cut spending this year to keep the budget deficit in check.

Exports are rebounding quite strongly and "that's encouraging", Ms Indrawati said in an interview on the sidelines of the Islamic Development Bank's annual meeting in Jeddah on Wednesday. The global outlook has improved and domestic demand is holding up, she said.

"Having the growth rate above 5.6 per cent in this case is going to be very critical," she said.

"We are aiming higher by actually providing all the possible policy designs in order to accelerate growth higher."

South-east Asia's biggest economy has underperformed in recent years on the back of weaker commodity prices and a slowdown in China. While growth quickened to 5 per cent in the first quarter as exports rebounded, the outlook is threatened by weakening prices of coal and palm oil, Indonesia's main commodity shipments.

Ms Indrawati said the government is aiming to boost tax collection, but its revenue projections for 2017 are "quite conservative". If there's a need for budget curbs, the government will seek to reallocate resources rather than cut spending, she said.

"We do hope we are not going to make a decision of cutting the budget," although the president has already asked the cabinet to design a policy aimed at more productive spending, she said.

"So if there is adjustment, it's not a cutting, but a reallocation or shifting from the less productive to more productive."

The government is targeting growth of 5.1 per cent to 5.2 per cent this year and estimates the budget deficit will reach 2.4 per cent of gross domestic product, below the 3 per cent cap.

BLOOMBERG